Feds indict businessman in $4M scam

Kenneth Dachman appeared to follow the same game plan for many years: woo investors to his startup businesses, spend much of the money on himself, declare bankruptcy to avoid paying off debts and then start all over again, according to former investors.

During the last three decades, the north suburban businessman was sued more than 50 times for a variety of alleged scams, but most of the litigation involved relatively small amounts of money and he escaped the attention of criminal investigators.

But on Wednesday federal authorities caught up with Dachman, indicting him on 11 counts of wire fraud for scamming about $4 million from dozens of investors in his latest venture, a now-defunct sleep disorder business.

The charges follow a front-page Tribune story in October 2010 detailing Dachman's legal travails, including at least seven bankruptcies and a string of angry investors who said they were duped by his offers of substantial annual returns. At the time, James Koch, a lawyer representing some of the investors, dubbed Dachman "a serial financial predator" who had slipped through the cracks for years.

"Most white-collar criminals fly under the radar, but this sends a message that you can't just file bankruptcy, hide your money and transfer entities," Koch said Wednesday of Dachman's indictment.

Dachman has long denied any wrongdoing. His attorney, Thomas Brandstrader, declined to comment Wednesday.

The charges alleged that Dachman exaggerated his credentials, falsely claiming he held a Ph.D. from Northwestern University, and padding the resumes of purported employees. He portrayed his son-in-law as a marketing whiz when, in fact, he was a tattoo artist, authorities said. He also boasted that his business, Central Sleep Diagnostics, was "on pace to be the most important and largest sleep diagnostic firm in the world," the indictment said.

The investors said Dachman's pitch seemed promising: treat sleep apnea and other related illnesses by conducting studies in the comfort of a patient's home rather than in a hospital or laboratory.

Lea Archer even traveled from her home in Arizona in 2009 to check out Dachman's Northbrook facility. The Phoenix Realtor, 70, described the offices as tidy and professional-looking with sleep monitoring stations.

Archer said she lost about $250,000, her entire nest egg, forcing her to put off her retirement this year.

Prosecutors charged that Dachman blew at least $2 million of the investors' money on his own expenses. In addition to the mansion and vacations to Italy and Alaska, Dachman spent more than $200,000 trading stocks and more than $180,000 to operate a Chicago tattoo parlor with his son-in-law, authorities said.

The indictment comes on the heels of a federal judge's decision this month that ordered Dachman and his family to repay $2.5 million to investors.

As part of the indictment, federal authorities are also seeking the $4 million allegedly scammed by Dachman — as well as a Land Rover once valued at $60,000, which he allegedly bought with the investors' money.

Archer and other investors applauded the federal criminal indictment, saying they hoped it would prevent Dachman from future business endeavors.

"We don't know whether we will actually recover any money," said Dick Horneck, of Lake Barrington, who alleged he lost $70,000. "But at least we have the satisfaction that he isn't going to easily do this again."